The high profile rejection of the Keystone XL Pipeline by the White House left 20,000 jobs unrealized, but this slight to the unemployed and underemployed pales in comparison to the economic effect that the President’s desired energy tax increases will have on American consumers. Punitive tax increases on the production of oil and gas may well fund the President’s favorite left-wing programs in the short term, yet the long term loss in jobs and tax revenue would strike a serious blow to the fragile economy.
An economic analysis performed by LSU professor Dr. Joseph Mason clearly shows that increasing taxes on domestic oil and gas companies would give a leg up to foreign firms, while eliminating 155,000 U.S. jobs and slashing $68 billion from national wages. This transfer of wealth abroad would result in a net loss of $53.5 billion in federal revenue, which demonstrates that the Administration’s desired cash grab is more about currying favor with anti-oil activists during the 2012 election cycle than it is about balancing the budget.
If President Obama is serious about turning the tables on record unemployment rates, he should utilize the energy industry to create jobs, not continue to demonize one of the few sectors that continues to create good-paying jobs. Between shovel ready projects like Keystone XL, the vast offshore resources on our coasts and in the Gulf, and the 175 year supply of natural gas under North American soil, we have an amazing opportunity. Developing these resources will not only create jobs, but help reduce the debt and increase our energy security. Indeed, increasing domestic production will limit foreign control over the U.S. oil supply — an increasingly important goal considering the recent instability due to Iran’s threat to close the Strait of Hormuz.
Experts agree that oil and gas will drive the U.S. economy for the next several decades. Doubtlessly, President Obama’s campaign is facing significant pressure from environmentalists to put up a strong front against oil and gas production, but lawmakers must remain in touch with reality. Projects like Keystone XL will bring needed jobs to the economy. Higher energy taxes will send needed jobs out of the country.
The energy sector has continued to create jobs during the recession. In fact 1/5 of all private sector jobs created from 2003 to 2010 were in the oil and gas industry. Stifling this vital economic engine through higher taxes to fund more failed political experiments like Solyndra is unwise and reckless. U.S. jobs are on the line.
 As Robert Samuelson recently noted, “There’s some dispute over the magnitude. Project sponsor TransCanada claims 20,000, split between construction (13,000) and manufacturing (7,000) of everything from pumps to control equipment. Apparently, this refers to “job years,” meaning one job for one year. If so, the actual number of jobs would be about half that spread over two years. Whatever the figure, it’s in the thousands and thus important in a country hungering for work. And Keystone XL is precisely the sort of infrastructure project that Obama claims to favor.”
This incredible growth over the last four years of the recession has occurred despite attempts by the current White House to significantly increase taxes on the industry, a successful yearlong ban on offshore drilling in the Gulf, and a refusal to open oil and gas exploration in portions of the Atlantic and Alaska.
The President and his allies in Congress have repeatedly sought after increased energy taxes which would leave the U.S. less competitive against foreign energy companies. Their plan is to punitively eliminate a measure for domestic oil and gas firms which is meant to encourage repatriation and reinvestment of revenue earned overseas into the U.S.. The deduction is provided to all American companies operating overseas to ensure they have the necessary funds to compete and succeed against bigger foreign firms. In the oil and gas industry, the competition includes government owned and supported companies in China, Russia, Venezuela, and elsewhere. These tax hikes would have a broad impact.
The President has urged these punitive tax increases to support government jobs programs, but the effect would actually be the elimination of jobs. The immediate shock of the tax increases would be the loss of 155,000 U.S. jobs in the energy industry and many related fields supported by their operations, including medical services, dining, and finance. And while the increases may offer initial revenue, the dismantling of the industry would reduce the estimated $85 million paid in taxes, royalties, and rents every day by oil and gas companies. Over ten years, government modeling shows that the taxes would result in a net loss of government revenue totaling $53.5 billion. It quickly becomes clear that, far from creating jobs, these attempts are a job killer.
The oil and gas industry is important to the economy, and helps support over 9 million total jobs. The impact of the industry was evident during the recent moratorium on Gulf drilling when over 20,000 direct and indirect occupations disappeared. The EMSI analysis shows in detail that oil and gas companies are growing and creating thousands of well-paying jobs at a time when good jobs are hard to come by. As we head into 2012, an important election year for the President with a focus on the economy, it will be interesting to see whether he embraces the growth in this industry and works to encourage it, or continues to attack these companies; his job just might depend on it.Read More
“We spend so much time theorizing about new steps government can take to create jobs that we sometimes overlook the jobs that are right in front of us waiting for government approval.
Take the proposed $7 billion Keystone XL oil pipeline running from Canada to the U.S. Gulf Coast. It would create tens of thousands of new jobs in construction, maintenance and refining. Secretary of State Hillary Clinton supports the project, yet regulatory hurdles remain. States like Nebraska, whose approval is overdue, need to get on board with Secretary Clinton and help push this massive jobs creation project through.
With millions of Americans clamoring for employment opportunities, there is no excuse to delay. A study released last month by the Woods Mackenzie research firm found that 1.4 million jobs and $800 billion in new government revenue could be created over the next two decades by removing barriers to increased domestic oil and gas production. These are high-paying jobs, available now, and private industry—not the taxpayer—is making the investment.
We need to support leaders who are working to realize the enormous potential of America’s oil and gas industry. I don’t agree with everything President Obama has done on the economic front, but it has been unfortunate to watch fellow Democrats not back him on energy projects like the Arctic Sea permits. To ignore these resources and economic potential is counterproductive.”
Read Congressman Ford’s piece here. American energy companies could create some 1.4 million jobs over the next two decades – so long as the government lifts restrictions on boosting oil and gas production. Ultimately, as Congressman Ford notes, “Americans are asking where the jobs are. The answer: They’re all around us. We need to get out of their way, now.”Read More
Instead of embracing a potential 1.4 million jobs by expanding energy production and refining, the President proposed a $41 billion tax increase on the industry; a move which could cost 155,000 American jobs and $53.5 billion in government revenue. But these tax increases are not the only area where job growth opportunities aren’t being capitalized on.
The Keystone XL Pipeline, a project to link Canadian oil sands to U.S. refineries, has been on hold for three years while the U.S. State Department produced an environmental impact statement (EIS). The final EIS released by Sec. Hillary Clinton’s department earlier this year concluded that the project posed no significant environmental threat, so Keystone XL should be moving forward, right? Wrong. It is now facing further delays from a flurry of environmental activism, and approximately zero of the 20,000 immediate construction jobs the pipeline promises to create have been realized.
Activists oppose the development of Canadian crude oil, but fail to realize that development will go forward with or without approval of the pipeline. If the Administration does not move on the project, the energy resources and jobs will instead be shipped to China, a quickly emerging economic powerhouse rivaling the U.S. in the global economy.
The $7 billion privately funded project to build a pipeline from Alberta to several of the nation’s 148 oil refineries would generate billions in government revenue. This capital could then be reinvested in the country without raising taxes.
Conversely, the President’s jobs plan would use $140 billion on infrastructure updates by increasing taxes. While the nation certainly needs infrastructure updates, squeezing U.S. businesses of the dollars they could use to grow and hire, in an attempt to create stimulus jobs that offer nothing back to the economy, is a shortsighted strategy and business as usual in Washington, D.C.
Unfortunately, the rest of the country is suffering from a high unemployment rate and things are far from usual. Instead of pursuing costly and ultimately futile government temporary jobs programs the Administration should get out of the way and allow projects which create real jobs and capital, like Keystone XL to go forward. Over 15,000 U.S. companies are active in oil and gas exploration, supporting the employment of more than 9 million Americans. Administration support for this industry and job creating projects like Keystone will increase the demand for U.S. workers, reduce unemployment, and gain the President credibility as a job creator going into the 2012 election. On the other hand, tax increases and delays will only increase the demand for political spin to account for more losses in the jobs market.Read More
New Study: Repealing Tax Deductions on U.S. Energy Companies Exacerbates Federal Deficit, Increases U.S. DebtLouisiana State University Endowed Chair of Banking and nationally-renowned economist Dr. Joseph R. Mason today released a just-completed study that finds the Administration’s proposal to carve out U.S. energy firms from receiving certain tax deductions would have a net negative impact on federal revenues.
The morning of the study’s release, Dr. Mason spoke at a Policy Briefing Breakfast hosted by The Hill entitled “Energy Policy & Deficit Debate” where he highlighted the findings from his study. See the video below for highlights from Dr. Mason’s commentary.
Afterwards, Dr. Mason appeared on Fox Business Channel to discuss his study and the broad, harmful economic impact of repealing oil and gas tax incentives. Click here to see the interview.Read More
Our mounting debt and deficit is the result of a spending problem, not a revenue one. Yet, in a proposal released this week, Senators Robert Menendez (D-NJ), Sherrod Brown (D-OH), and Claire McCaskill (D-MO) show they’re still myopically focused on grabbing more tax dollars rather than being economic with the ones they already receive by unilaterally targeting the domestic oil and gas industry to eliminate tax deductions utilized by nearly all industries.
Couched in lofty rhetoric about reducing the deficit and lowering gasoline prices, the proposal is yet another attempt by Washington politicians to deflect blame away from themselves for our nation’s energy challenges. Their narrow focus could also come at a high cost to American families.
A 2010 analysis by LSU finance professor Joseph Mason calculated that eliminating the Section 199 credit and dual capacity deductions solely for domestic oil and gas companies, as the Senate bill proposes, would eliminate 154,000 jobs immediately, and cost the nation $341 billion in economic output. In the sponsor senators states, Missouri, Ohio, and New Jersey, the economic losses would total $1.38 billion, $7.63 billion, and $8 billion respectively by 2020. Hardly the antidote for a struggling economic recovery.
Moreover, the Senate legislation would add an additional cost to oil production, meaning higher prices at the pump, in the grocery store, and on the our monthly energy bills. This may not concern jet-setters like Sen. McCaskill; but for the average American facing $4 a gallon gas prices, it’s a difficult expense to swallow.Read More